August 09, 2012. The Detroit News (Washington, D.C.) – Struggling battery maker A123 Systems Inc. — with nearly 800 employees in Michigan — said it reached a deal with a Chinese auto parts company for an investment of up to $450 million that could keep the company in business – and will likely see the Chinese firm acquire a majority stake in the battery maker.

Waltham, Mass.-based A123 reached a deal with Wanxiang Group Corp. that will allow the Chinese firm to acquire an 80 percent stake in A123.

A123 has won about $500 million in grants and other support from state and federal governments – including $238 million from the state of Michigan and a $249 million Energy Department grant as in August 2009 as part of the $800 billion stimulus.

A123 in April received a two-year extension on its deadline to spend the rest of the $249 million grant.

The money was to be used for the construction of new lithium-ion battery manufacturing facilities in Michigan. A123’s Livonia plant opened in 2010, and its Romulus plant opened last year. The company has $120 million left of the $249.1 million grant.

In an interview, A123 CEO David Vieau said the company has had preliminary talks with the Energy Department about the Chinese financing, but he said he expected A123 would be able to use the remaining funds “to build factories and create American jobs.”

He also said he expected A123 would continue to operate as a standalone company for the time being and pointed to Wanxiang’s track record in the U.S.

China has made growing its battery industry a big priority, while support in Congress for additional incentives for battery makers has slowed amid concerns about the strength of the electric vehicle market.

A123 said Wednesday its net loss widened in the second quarter to a larger than expected $82.9 million, up from $55.4 million in the same quarter last year.

Founded in 2001, A123 has lost about $600 million since 2008 and its stock price has fallen 91 percent over its 52-week high amid questions that it would run out of cash. With a market value of $70 million, A123 was recently trading at $0.48 a share, up 2 percent, or $0.01.

A123 faced a series of problems, including layoffs and the recall of some batteries for safety concerns along with a cash crunch.

In the face of struggling electric auto sales, A123 said in May there was “substantial doubt” about the company’s viability.

Wanxiang is China’s largest auto parts company and one of its largest private firms. It is the second largest owner of Guangzhou Automobile, China’s most profitable domestic car company, which has joint venture partnerships that include Honda Motor Co, Toyota Motor Corp and Fiat Corp.

Wanxiang’s proposed investment in A123 “is intended to create the capital structure necessary for the company to continue growing its core businesses, and alignment with Wanxiang is also expected to substantially strengthen A123’s access to the growing vehicle electrification and grid-scale energy storage markets in China,” A123 said.